Contributions to Athletic Scholarship Programs

Universities with football programs (or other major sports) often offer preferred game seating and ticketing options to givers of their scholarship programs. Payments to athletic scholarship programs qualify for charitable contribution deductions only to the extent that they exceed the fair market value of any substantial benefits received in return.

In Revenue Ruling 86-63, the Internal Revenue Service (IRS) ruled on the tax deductibility of contributions to athletic scholarship programs for four different scenarios. They are as follows:

  1. When payments to an athletic scholarship program allow a taxpayer to purchase tickets to athletic events and reasonably comparable tickets (based on location of seats and price) otherwise would not have been readily available to the taxpayer,
    a substantial benefit is afforded to the taxpayer; therefore the payments do not qualify as charitable contributions.
  2. When the payments made to an athletic scholarship program in the circumstances described in the first scenario exceed the minimum contribution required to purchase tickets, the excess is allowed as a charitable contribution.
  3. When payments to an athletic scholarship program allow a taxpayer to purchase tickets to athletic events, and reasonably comparable tickets would have been readily available to the taxpayer even if no payment had been made to the athletic scholarship program, then the full amount of the payment is allowed as a charitable deduction.
  4. When payments made to an athletic scholarship program allow a taxpayer to purchase tickets to athletic events, and although the events are not sold out, reasonably comparable tickets are not otherwise readily available to the taxpayer. The university informs the taxpayer of its reasonable estimate of the fair market value of the right to purchase season tickets. Because that figure reflects the fair market value of the benefit provided, payments in excess of that amount are allowed as a charitable contribution.
It is important that universities with such ticket and athletic scholarship programs disclose the fair market value of the right to purchase tickets provided to givers. Universities should consider all relevant factors, including location, view, and demand for tickets, when making a fair value estimate for tickets.

 


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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